Government study belies fears of Alberta housing bubble

Government study belies fears of Alberta housing bubble

Alberta’s housing market won’t see a repeat of the 1980s drubbing despite the slump in oil prices, a new internal federal government analysis has assured.

The Department of Finance (DOF) released a comparison of the potential real-estate fallout in the province as a result of the 2014 collapse in oil prices with the pain inflicted on the provincial market during the financial crunch of the early 1980s, Canadian Business reported.

The study said the “particularly severe impact” Alberta suffered 30 years ago was amplified by an even weaker world economy and higher inflation that fuelled big interest-rate hikes.

The DOF document, written in January, said it expected a real-estate decline this time around to be shorter and have less bite in the province.

Some experts warned that the country may see impending price corrections, or worse, a housing bubble. To counter these fears, the Bank of Canada claimed the market is instead headed for a soft landing despite identifying it as a key financial stability risk.

The central bank also admitted Canada’s homes are overvalued by 30 per cent.

Meanwhile, additional data from the Canadian Real Estate Association said Alberta’s house sales activity for March was down 30 per cent compared to 2014 figures. Edmonton’s sales also dropped by almost six per cent.